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Foundations of Casualty Actuarial Science

e.g, salvaging equipment not damaged by fire, from
a fire ravaged building.

(iv) Segregation of exposure units - The purpose
of segregation of exposure units is to reduce the
size of any one loss by dividing up an entity's
exposure. There are two main types, (a)
separation- this is simply taking an entity's
existing exposures to possible loss and dividing
them into smaller groups that are subject to
possible loss.

E.g, instead of a taxi company keeping all its
taxis in one warehouse, it could use four different
warehouses; and (b) combination - Combination
increases the entity's number of exposure units,
thus making losses more predictable and less
likely to affect a significant percentage of the
exposures. E.g, the taxi company could add to
its fleet.

A special example of combination is duplication,

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